A long, long time ago the property sector of the JSE was a boring place for investors. It did not yield results higher than other more vibrant and faster growing sectors. But it was predictable, virtually guaranteed.

How times have changed.

These were the simple and even boring shibboleths that defined the listed property sector.

It is hard to say exactly when things changed. Property markets fell hard during the 2008 financial crisis, but recovered and up until 2015, listed property in this country was the best performing asset class over 12 years, returning 547percent versus the JSE All Share Index’s 357percent and 284percent for bonds.

The SA Listed Property Index shows it trading in a relatively steady band from 2015 until the end of 2017, but the trend drops sharply in 2018.

The index, which features the JSE’s top 20 liquid real estate companies by market capitalisation, fell more than 30percent from January 2 to December 28, 2018.

Much of this was due to the severe decline in the Resilient property funds, and the strengthening of the rand, but the market was also generally weak.

At the start of 2019, many property sector commentators predicted a better year.

Interest rates were steady, President Cyril Ramaphosa was working hard to curb corruption, Edcon would be recapitalised and restructured after the buy-in of its major landlords, and many of the listed property companies were doing well in their respective offshore portfolios.

And although no miracles were anticipated, economic growth in South Africa was expected to be marginally better than in 2018.

In the absence of any major unexpected event, property market analysts predicted a total return – share price and income distribution growth – of 13 to 14percent for the year.

So far, they have proven to be way wrong!

Fast-forward five months, and the SA Listed Property Index is at almost the same level as it was at the beginning of the year.

A recent spate of results by listed property companies provides some insight into the many factors that are hurting these businesses, and the figures do not paint a pleasant backdrop for investors.

Redefine Properties, the leading South African-based real estate investment trust (Reit) that is included in the Top 40 index on the JSE, increased its distribution for the six months to February 28 by only 4percent, and its management does not anticipate the growth figure improving over the rest of the year.

Chief executive Andrew Konig said 4percent may seem low, but relative to the environment, “where our reference points are constantly being reset the results are pleasing”.

For another look at just how weak the local property market is, consider Indluplace Properties, the largest residential focused Reit, which missed its income distribution forecast for the six months to March 31 – its income for distribution fell 22percent.

Indluplace, with its portfolio mainly of one and two bedroomed units, says the middle income tenant in this country is under pressure financially, and the environment that the group trades in was worse than they had anticipated only six months ago.

It had to provide financial incentives to keep its tenants.

Factors behind the weak local property fundamentals include above-inflation administered price increases, such as for electricity and municipal charges; uncertainty over the government’s policy on land rights, rising fuel prices and taxes; low levels of business and consumer confidence, problems at Eskom and the political uncertainty that has paralysed public and private sector decision-making through nine months ahead of the election.

Offshore returns, particularly from the UK where many South African investors hold property, have also been lacklustre this year – Brexit continues to bring uncertainty, as does a tightening trade dispute between the US and China. Global growth remains relatively sluggish and there is structural change taking place in developed country property markets due to the rapid growth of online shopping.

These concerns have caused the share prices of local property companies with large exposures in the UK in particular, to fall severely. Consider intu Properties, for instance, which has seen its share price decline 37percent since November.

Locally, there has been some hope that the peaceful election outcome will lift consumer and business confidence levels, both of which are at historical lows, but a number of business leaders have warned that this won’t happen quickly, at least not in the next six months.

For investors in the listed property sector, this means at least another six to 12 months of lacklustre returns, and there is a risk the situation could deteriorate further.

For somebody entering the listed sector for the first time, however, now might be the right time to pick up some excellent property investments at good prices. Many commentators argue that the property sector is at the bottom of an economic cyclelet’s hope so!